REQUIREMENT

Acceptance Must Be Unconditional

• Sec 7(a)
In order to convert a proposal into a promise,
the acceptance must be absolute & unqualified.

• If the acceptance has the elements of some

qualification = not valid
 Acceptance ‘subject to contract’
• No binding contract between the parties.
• Reasons:
i) No intention to create legal relation
ii) Contrary with Sec 7(a) – unqualified accept.

• UNLESS there are other factors which could

prove otherwise.
 Cases – ‘subject to contract’

• Low Kar Yit v Mohd Isa [1963] MLJ 165

F: D gave an option to the P to buy land subject
to;i) Formal agreement-drawn, agreed & sign
ii)Agreement approved by High Court
P’s exercised the option but D refused to sign.
P sued D.
Gill J:
…the option was conditional upon a formal
contract to be drawn up, agreed and signed by
both parties. Therefore by exercising the
option there is no valid acceptance yet and
merely an agreement to enter into an
agreement.
Chilingworth v Esche
H: ‘Subject to contract’ did not create a contract
because a new and further condition was
introduced by the use of the phrase.
Winn v Bull
F:Defendant agreed with the plaintiff to take a
lease “ subject to the preparation and
approval of a formal contract”.
H: No binding contract.
Ayer Hitam Tin Dredging Malaysia Bhd
• Supreme Court: If an agreement is made
subject to certain conditions, then until those
conditions are accepted, there is no
enforceable contract.
Abdul Rahim bin Syed Mohd
F:The purchase and vendor signed a MOU for
the sale of land.

H:Considering the MOU as a whole, its objective

and intention of the parties. The MOU was not
a legally binding agreement.
Lim Chia Min
F:Defendant intends to buy the P’s business –
sent letter with RM5000 cheque to the P
stated that a formal agreement should be
executed within four weeks; failure – the P
shall forfeit the sum.
H: The letter did not constitute a legally binding
contract merely expressing the D’s intention.
Lee Chin Kok v Jasmin Arunthuthu Allegakoen
F: Estate agent of R wrote a letter marked
‘without prejudice and subject to contract’ to
A. Letter- A must pay RM3000 as a sign of
good faith & if local authority approved the
plans , A has to pay 10% of the sale price.
Later R sold the property to someone else & A
took action against R.
H: There was no concluded contract between
the parties.
Only if the plans were approved, the purchase
agreement will proceed.
 Cases – different decision
Daiman Development Sdn Bhd
F:R paid a booking fee & signed a pro forma for
a purchase of a house from A. A increased the
price, R refused to pay. A – pro forma was
subject to contract, no contract yet.
Privy Council:
Upon the true construction of the pro forma ,
the appellant was clearly bound by it.
Diamond Peak Sdn Bhd
F:D agreed to sell a land to P. Transaction was
completed through letters. In a letter, D – ‘ I
leave the technical details to the lawyer’. Later
D refused to sell & P brought an action.

H: There was already a binding oral contract.

Voo Syun Mui v Yap Mooi Mooi [1984] 2 MLJ 48
H: It was the intention of the parties to come to
a complete agreement about the sale. The
mere fact that it was subject to an agreement
to be signed did not necessarily mean that
there was no enforceable contract.
Charles Grenier Sdn Bhd
Held: There is an open and enforceable contract
only when the parties to the transaction, the
property, the price and the essential terms
have all been identified with sufficient clarity.
 Important Notes
• In interpreting “ subject to contract” it is
important to see the intention of the parties.
• The word ‘contract’ may implies two things:
• Either ; it (the execution of a written contract) is
just a mere formality, whereby the parties had
already entered into a legally binding contract.
• Or ; the parties intended that their rights and
obligation are suspended until a formal contract
was entered into.
 Communication of Acceptance
• Must be communicated to the proposer
• Sec 3:
The communication of the acceptance of
proposals…are deemed to be made by any act
…of the party accepting…by which he intends
to communicate the acceptance…
• Acceptance – in writing, verbal or conduct
 Silence – not an acceptance
Felthouse v Bindley
F: Mr F offered to buy his nephew horse for a
certain sum. He told the latter that “ If I hear
nothing, I shall consider the horse is mine at
that price”.
The nephew never give any reply but he told Mr
B i.e. the auctioneer not to sell the horse as he
intend to reserve it for his uncle. Mr B sold the
horse by mistake and Mr F sued him
 Acceptance
• Sec 2(b)
When the person to whom the proposal is made
signifies his assent, the proposal is said to be
accepted.
• Sec 2(c)
…person accepting the proposal = promisee
Held:
There was no contract between the parties as
the acceptor (the nephew) never signified his
acceptance to the offeror (Mr F) regarding the
offer before the auction.
 General rule- communication of
acceptance
• An acceptance is complete once it has
reached the knowledge of the proposer
• Applies in communication of acceptance by
instantaneous manner.
• Examples: Telephone, telex, fax,
 Cases
Entores Ltd v Miles Far East Corporation
F: Offer was made by telex from London. The
acceptor sent his acceptance by telex from
Amsterdam.
H: The communication of the acceptance is
complete when it was received by the offeror
in London. The contract was made in the
country the acceptance was received
i.e.London.
 Exception – Postal rule
Sec 4 (2) The communication of an acceptance is
complete:
(a) Against the proposer, when it is put in a
course of transmission to him.
(b) Against the acceptor, when it comes to the
knowledge of the proposer.
• Illustration (b)
B accepts A’s proposal by a letter sent by post:
The communication of acceptance is
complete:
against A, when the letter is posted
against B, when the letter is received by
A
 Case
Ignatius v Bell
F:D gave the P an option to purchase his land
and stated that the option should be exercised
before 20th August in writing. On 16th
August, P sent a letter accepting the offer but
it was only received by D on the 25th August.
By that time, D had already sold the land to
somebody else. P sued for specific
performance.
Court of Appeal of Selangor:
• The acceptance was complete against the D
(proposer) when it was put in the course of
transmission so as to be out of the power of
the P (acceptor) i.e. when P posted the letter
of acceptance on the 16th August.
Adam v Lindsell (1818)
F:The offer took a longer time to reach the
acceptor. Immediately, the acceptor posted
the acceptance whilst the proposer (D) had
already sold the item offered.
H:Acceptance was complete upon posting.
 The post must be a reasonable means of
communicating acceptance
• Sec 7(b)
In order to convert a proposal into a promise,
the acceptance must be expressed in some
usual and reasonable manner.
Henthorn v Fraser
‘ it must have been within the contemplation of
the parties that, according to the ordinary
usages of mankind, the post might be used as
a means of communicating the acceptance of
an offer’
LeeSeng Heng v The Guardian Assurance Co
F:D post a letter on the 27th March from S’pore
to P in Buluh Kasap to terminate P’s fire
policy.The nearest post office to BK was at
Segamat and letters to BK was only delivered
when the amount of letters justified a journey.
1st April,P’s village destroyed by fire & P
claimed insurance. D-policy has been
terminated.
Held:
In the circumstances of the case, it is found
that the parties agreed to use the post
communication as their usual communication.
Therefore postal rule applies.
 Intention of the parties- where the manner is
being prescribed
Sec 7(b)
…If the proposal described a manner…and the
acceptance is not made in that manner the
proposer may…insist that his proposal shall be
accepted in the prescribed manner…if he fails
to do so, he accepts the acceptance.
Holwell Securities Ltd v Hughes
F: Acceptance must be in writing and self-
delivered. The acceptor posted the letter of
acceptance – letter lost.
H: The manner of acceptance has been
prescribed. There was no binding contract.
Eliason v Henshaw
F: E – acceptance should be within specified
time and sent to Harper’s Ferry. H sent it to
Georgetown thinking that the letter of
acceptance would reached E earlier.
H: E may refuse the acceptance of letter as it
was not done in the prescribed manner.
Tim v Hofman
F: Acceptance should be by post

H: ‘By post’, does not mean that exclusively a

reply by letter by return of post, but a reply by
telegram or by verbal message or by any other
means not later than a letter written by return
of posts.
Sec 7(b)-…insist …the proposal shall be accepted
in the prescribed manner
• Malaysia • England
May insists the Not in the prescribed
prescribed manner manner,acceptance
otherwise considered will become void
to have accepted it
 Proposer may waive-communication of
acceptance
Sec 8 – performance of the conditions of a
proposal…is an acceptance of the proposal

-Performance of an act means an acceptance

-Unilateral contract, eg: finding lost item
Errington v Errington & Woods
F: A father promised his son and daughter in law
,if they paid off the balance of the mortgage
installments of the house, he would convey
the house to them. Before all the payments
have been made, the father died.
H:The act of paying the installment created a
contract between the parties. There is an
acceptance from the defendants.
Daulia Ltd
“ in a unilateral contract once the offeree has
embarked on performance of the condition it
was too late for the offeror to revoke his offer.
 Cross Offer
• A writes to B proposing to sell an item at a
certain price and at the same time B made an
offer to buy the same item at the same price.
This is known as cross offer and there is no
binding contract.
ACCEPTANCE

Requirement
Communication